What Caused the Stock Market Crash of 1929?

By Staff WriterLast Updated Apr 4, 2020 4:52:06 PM ET
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The stock market crash of 1929 was largely caused by bad stock market investments, low wages, a crumbling agricultural sector and high amounts of debt that could not be liquidated. Upward trends in the stock market caused many people to invest money, even if they did not have the financial assets to back up their investments.

During the 1920s, people believed that investing in the stock market was a solid investment. The continual upward trend of stock prices gave many the assurance needed to buy stocks on margin. Buying on margin refers to the act of putting a small amount of money down on a stock and allowing the broker to "lend" the rest to the investor. When stocks rose, the investor made money and was able to make up the difference. When prices fell, the investor had to pay back the money that was owed.

In October 1929, stock prices began to fall, and the market crashed completely on October 29th. People were panicking to sell their stocks in a hurry to avoid being left with worthless stock. Stock prices continued to drop for two years, and many people lost their entire life savings. The Great Depression followed, resulting in the worst economic period in the history of the United States..